Singapore High Court Found Former Top Prudential Agency Manager Liable For Breach Of Contract In Soliciting Mass Exodus Of More Than 200 Agents.
Legal News & Analysis - Asia Pacific - Singapore - Dispute Resolution - Insurance & Reinsurance
25 May 2021
In June 2016, there was an exodus of over 200 agents of Prudential, who gave notice of termination of their agency agreements en masse. Prudential alleged that its former top agency leader, Peter Tan Shou Yi, had surreptitiously orchestrated the mass defection of these agents to Aviva, a competitor in the industry. In Prudential Assurance Company Singapore (Pte) Ltd v Peter Tan Shou Yi and anor  SGHC 109, the Singapore High Court found that in soliciting agents to defect to Aviva, Peter had breached his contractual obligation to conduct his insurance business “with integrity and honesty”.
The Plaintiff, Prudential Assurance Company Singapore (Pte) Ltd (“PACS”), primarily sold its products through a “tied agency” i.e. through agents who sell only its products.
The 1st Defendant, Peter Tan Shou Yi (“Peter”), was a senior agency leader of PACS and ran an agency unit in PACS known as the “Peter Tan Organisation” (“PTO”). By 2016, PTO was the largest agency group in PACS, comprising some 500 agents, and contributing approximately 10% of PACS’ entire agency force’s sales production measured in annual premium equivalent.
In mid-April 2016, Peter met with Aviva Limited (“Aviva”), a competitor to PACs, and explored the idea of being a consultant with Aviva.
In May and June 2016, Peter held several meetings with the agency leaders from PTO. At these meetings, Peter spoke to the agency leaders about the move to Aviva, the advantages of joining Aviva, the financial package offered by Aviva, and what the agency leaders should say to their agents.
On 1 June 2016, Peter incorporated the 2nd Defendant, PTO Management and Consultancy Pte Ltd (“PTOMC”). Peter was PTOMC’s sole shareholder and director.
Between 15 and 17 June 2016, 195 agents of PACS gave notice of termination of their agency agreements with PACS en masse, and by February 2017, that figure rose to 244 agents. Of the 244 agents, 241 had belonged to PTO. Peter himself gave notice of termination of his agency agreement with PACS on 8 July 2016. PACS responded by summarily terminating Peter’s agency agreement for breach of the same.
On 23 July 2016, Aviva, Peter and PTOMC entered into a Distribution Advisory Agreement, whereby PTOMC would be the exclusive provider of certain services to Aviva’s wholly owned subsidiary financial advisory firm (“AFA”) for a period of 10 years. These services included providing strategic direction and assisting in the development of business plans to grow AFA, and providing advice to Aviva on how to increase Aviva’s market share through AFA.
In July 2019, PACS commenced proceedings in the High Court of Singapore alleging as follows:
As against Peter, that he had, by his acts of solicitation, breached his contractual obligations to PACS, including a non-solicitation obligation, an obligation to conduct his insurance business with integrity and honesty, and an implied duty of mutual trust and confidence.
In addition, that Peter had breached his fiduciary duties to PACS.
As against PTOMC, that it had dishonestly assisted in Peter’s breach of fiduciary duties.
Peter in turn counterclaimed for inter alia wrongful termination of his agency agreement by PACS, and conspiracy to injure by unlawful means.
Findings of the Singapore High Court
The Singapore High Court held that Peter had breached his agency agreement, which provided that Peter shall “conduct his insurance business with integrity and honesty”. In this regard, the Court found that this obligation required Peter to serve PACS with good faith and undivided interest, and that duty meant that he should not do anything, during the currency of the agency, which may harm PACS. In the Court’s view, this duty included a duty not to solicit PACS’ agents (during the currency of Peter’s agency agreement) to join a competitor.
However, the Court found that Peter was not bound by any non-solicitation clause as, although there was a non-solicitation clause set out in the “agency instruction”, that clause was not incorporated into Peter’s agency agreement(s) with PACS. The “agency instruction” in question also did not fall within the scope of Peter’s agency agreement(s) with PACS. Obiter however, the Court considered that the non-solicitation clause, had it been incorporated, would have been reasonable and therefore enforceable.
In addition, the Court concluded that there was no basis for implying duties of mutual trust and confidence in Peter’s agency agreement with PACS.
In relation to PACS’ allegations that Peter had breached fiduciary duties owed to it, the Court found that Peter’s relationship with PACS was a purely commercial relationship, and Peter did not owe any fiduciary duties as pleaded by PACS. In this regard, the Court found that the relationship between Peter (as tied agent and agency leader) and PACS was not a legal relationship of agent-principal. Further, the circumstances surrounding Peter’s role at PACS also did not give rise to a relationship of mutual trust and confidence such as to give rise to fiduciary obligations.
Given the Court’s findings that Peter did not owe PACS any fiduciary duties, PACS’ claim against PTOMC for dishonest assistance (which required a breach of fiduciary duties) also failed.
Having found that Peter had breached his agency agreement with PACS, the Court awarded PACS damages to be calculated based on the profits that PACS would have earned from 227 of its former agents (being the agents that the Court found on the facts, left PACS as a result of Peter’s acts of solicitation) for the period of 9 May 2016 to 23 July 2016.
The relevant period of loss was determined to run from the time Peter started talking to the agency leaders about moving to Aviva, until the day after Peter’s notice period expired, whereupon he could have legally solicited the agents. The assumption made was that the same events would have played out, except that they would have started on 23 July 2016 (after Peter’s notice period expired) instead of in May 2016.
With respect to Peter’s counterclaims, they were wholly dismissed by the Court.
This case is significant not only because of the scale of the solicitation, but also because of the number of factual and legal issues that the High Court had to grapple with. Amongst other things, the High Court was prepared to interpret the obligation to act with “integrity and honesty” in Peter’s agency agreement as including a duty of non-solicitation during the currency of the agency agreement. Another significant finding was that Peter did not owe fiduciary duties to PACS, despite his extremely senior position within the organisation.
The case underscores the importance of insurance companies and companies with a similar business model reviewing their contracts with their agents to ensure that any non-solicitation clauses are (a) properly incorporated; and (b) properly scoped so as to be enforceable. Some of these issues would also be relevant to employees, and it will therefore be important for companies to review their contracts with their employees (in particular senior staff members) as well to ensure the enforceability of the relevant restrictive covenants.
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